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Tuesday, February 25, 2014

43 Retail Banking Myths

CROWDSOURCING SERIES

With the financial services industry changing so quickly, it should come as no surprise that many assumptions banks and credit unions believed to be true for years could actually be rendered obsolete. To uncover retail banking myths and provide new realities, I reached out to more than 40 global financial services leaders including bankers, credit union executives, industry analysts, advisors, publishers and editors, bloggers and fintech followers and got 43 myths.

Myth 1. Banks must embrace big data to be successful
Reality: Most banks and credit unions have not fully leveraged insight that is currently available within their firewalls. Account ownership, demographics, product use and other behavior data should be used for offers and communication before adding unstructured data from outside the organization.Data analyst from $20 billion bank

Myth 3. New market entrant competition is limited to deposits and payments but lending is safe.
Reality: Over the past five years, emerging Online and Independent lenders, many of whom did not exist during the depths of the Credit Crisis, have stolen 10% market share away from primarily the midsize / regional banks in the US.Wayne Busch, managing director of Accenture's North America Banking practiceMyth 4. The branch is dead.
Reality: It's not even on life support. There is a place for a brick and mortar experience albeit with fewer bricks and less mortar. We need to rethink the branch model and experience, but bankers will be offering a strong physical (and digital) presence for decades to come.Bryan Clagett, CMO, Geezeo

Myth 5. We need to excel in omnichannel banking
Reality: There is no such thing as a channel. Our objective should be to ensure a consistent digital approach across the whole customer engagement without thinking about channels. Channels should be considered as digital platforms that provide customer touchpoints.Chris Skinner, Chairman, The Financial Services Club Myth 6. Boomers like the touch of paper.
Reality: While this was true in the past, it is now a myth based on recent research from Celent.Bob Meara Senior Analyst, Banking Group, Celent

Myth 7. If you don't cross-sell a new customer within the first three months of the relationship, you've lost the chance to cross-sell.
Reality: It is better to focus on engagement (go with) services in the early days of a relationship, but selling additional products is best done later in the relationship when more is known about customer activity, product use, financial goals, etc.Ron Shevlin, Senior Analyst, Aite GroupMyth 8. Bankers need to at least sell 6+ (or 10+) products to customers to remain profitable.
Reality: More products doesn't mean guaranteed profitability or engagement. More importantly, the focus should be on customer needs and an improved experience as opposed to the bank or credit union's goals of 'more products sold'.Deva Annamalai, Bank Marketing Technologist, Salt Lake City

Myth 9. Customers are not willing to pay for mobile remote deposit capture.
Reality: Several banks have started to charge for this service without impact to their adoption/usage targets.Matthew Wilcox, Managing Director of Marketing Strategy and Innovation, Digital Payment Solutions , Fiserv

Myth 10. To purchase a complex banking product, the face to face relationship with an expert is irreplaceable.
Reality: The same was said for selling shoes. However, this does not mean you will not need any more experts, in combining face to face rendez-vous and remote access or to describe the rules of artificial intelligence software.Raphael Krivine, Director AXA BANQUE

Myth 11. Banking should be innovative.
Reality: Based on research done at our bank, we found that being innovative is about
doing the right things for customers in the areas of simplifying products and delivery and improving the customer experience.Jin Zwicky, VP Experience Design, OCBC Bank

Myth 13. Gamification is just for kids and not for finance.
Reality: Gamification is just another way of thinking about user engagement, interface design and loyalty. These factors can and should be applied in different ways for all age groups.Alex Bray, Retail Channels Director, Misys Banking Systems

Myth 14. Nobody wants to go to the bank branch anymore.
Reality: For most people this is true, especially for transactions and things that customers can do on their mobile. But not all customers want to do everything remotely and not everyone is in financial control of their lives. Some people want local advisory services.Chris Skinner, Chairman, The Financial Services Club

Myth 15. Customer Service (JD Power Scores, Net Promoter Scores) is a successful customer acquisition strategy and a focus on customer service will lead to higher profits.
Reality: Real or perceived levels of service far underperforms a strong value proposition for new customer acquisition (a better rate, a lower fee, or a more innovative product, etc.). Service can be valuable if reinforced with existing customers and can marginally aid in retention. In addition, banks with the highest JD power customer scores have historically had an inverse correlation to profitability.P. Andy Will, Consultant and former super-regional bank executive

Myth 17. Banks are eager to innovate.
Reality: More often than not, innovation within a bank represent non-disruptive incremental initiatives as opposed to true innovation. To keep up with customer needs, banks need to step well beyond their comfort zone.Duena Blomstrom, VP of Sales, Meniga

Myth 18. Paper application forms help reduce risk
Reality: Traditional forms (even if used digitally) provide a false sense of security (unacceptable level of risk) in a world where much more reliable insight can be found through social channels and other sources.Brett King, Founder of Moven

Myth 19. If you build it, they will come.
Reality: Adding new solutions, like mobile banking, online account opening, or personal finance management tools, will not automatically drive engagement or applications. New technology needs to be supported by marketing campaigns to raise awareness and communicate the benefit to consumers.Melanie Friedrichs, Analyst, Andera

Myth 20. You can’t build a business case for PFM.
Reality: Because of the power of retention and the potential of cross-selling additional services, well conceived and delivered PFM programs can deepen share of wallet, build loyalty and incase customer profitability.Matt West, Vice President of Sales, MoneyDesktop

Myth 21. Upgrading to latest the most advanced technology will make customers happy.
Reality: The culture within the organization will make it successful, not the strategy. As Peter Drucker said, "Culture eats strategy for breakfast".Deva Annamalai, Bank Marketing Technologist, Salt Lake CityMyth 22. Digital and Social Media are Replacing Traditional Marketing Channels
Reality: While more consumers are doing their shopping using digital and mobile channels and social media marketing can be effective, these channels serve to compliment and supplement traditional channels as opposed to replacing themFinancial Institution Marketer, $200 billion bank

Myth 23. Everyone is our target audience or we want everyone to be our member/customer.
Reality: When everyone is targeted, nobody is targeted. Marketing is most effective when you focus on serving a narrower range of consumers you can serve better than anyone else.John Mathes, Director of Brand Strategy, Weber Marketing Group

Myth 25. Surveying the customer will give insight to design the best mobile/online banking apps.
Reality: Customers don't know what's possible until you show it to them. An example might be photo bill pay. A few years ago, few customers would have thought of that, they wouldn't have known what it was (and many still don't). As it's demonstrated to them and they're encouraged to try it, they gradually see the usefulness of new tools like this. Customer feedback is great for telling you what's not working, and it's extremely important to fix problems customer identify quickly. But the innovative ideas are not likely to come from customers. They're more likely to come from creative staff members who are given the time, room and encouragement to conceive of and test new ideas.Penny Crosman, Editor, Bank Technology News and American Banker

Myth 26. Credit unions offer better service than banks.
Reality: Credit union execs need to shop banks they compete against (or find out where your employees banked before you hired them). More than half banked at, or worked for, a bank. Philosophy and tax exemption does not make a credit union better; consumer experience makes the difference.Bryan Clagett, CMO, Geezeo

Myth 27. All consumers will want to use mobile devices as their primary devices to perform banking transactions.
Reality: Consumer choice based on location and context will remain key to the means by which consumers do their banking. Pushing all consumers to mobile is just as restrictive as pushing them all to the branch or online banking. People use diverse means based on what suits their life and needs.Stessa Cohen, research Director Gartner

Myth 28. You cannot digitize everything.
Reality: Everything except flesh and blood can be digitized. The focus should be upon humanizing the digital relationship rather than digitizing the human relationship.Chris Skinner, Chairman, The Financial Services Club

Myth 29. Silo'd product areas are superior to non-silo'd product areas.
Reality: There is great value and synergy in understanding the relative revenue and profit contributions of the various product teams at a single reporting point, where politicizing is reduced and budgeting is centralized. Without silos, better service/product packages can be developed that can better serve the customer.P. Andy Will, Consultant and former super-regional bank executive

Myth 30. I already know my customers, I don’t need to do much to understand their financial needs or how those needs may be evolving.
Reality: Most banks do a terrible job of collecting (and using) customer insight. As a result, poorly timed and poorly structured offers are promoted, disenfranchising customers.Steven Ramirez, CEO Beyond The Arc Consulting

Myth 31. Online banking penetration of 60% or mobile banking penetration of 50% is good.
Reality: Don't mix up registered users with active users. A successful digital engagement strategy shouldn't be about channels, but about being focused on driving simplicity and client delight at every interaction.Bradley G. Leimer, Mechanics Bank

Myth 32. Banks are getting into Digital.
Reality: Most banks look at digital like another technology, completely missing the fact that digital (and mobile) are about new behaviors, in new contexts, and a different utility value.Scott Bales, Director, User Strategy

Myth 33. Customers don't like to be bothered by bank offers.
Reality: Bank offers that are well targeted to the individual at just the right time, and offer a compelling value exchange, are accepted at a much greater rate than typical offers.Bob Palmer, Global Industry Marketing Leader, Banking and Financial Markets, IBM

Myth 34:
Banks have built trust and a strong value proposition that is valued by customers.
Reality:
Customers trust banks to safeguard their money, but that is not to say that they trust banks. Too many Banks operate under stale me-too tactics that are not relevant to the current and future needs of the customer base as demonstrated by embarrassing cross-sale results, weak wallet-share and customer profitability. As a result, many Banks desperately deploy products and services, but most fail to capture consumers’ interest due to lack of a cohesive strategy, focus and clear value proposition.Serge Milman, Principal, SFO Consultants and Founder of Optirate

Myth 35. In digital, it’s all about account opening and getting a higher share of accounts opened online.
Reality: Given the multi-channel way people shop and buy, digital’s contribution to sales can’t be measured in online account openings, but in overall sales. Digital channels are critical to help drive ‘perceptual scale’ and drive higher overall sales that may ultimately be fulfilled in branches or other channels.
Sherief Meleis, Managing Director, Novantas

Myth 36. Retail banking is a profitable business.
Reality: Most banks probably lose money in retail banking and could generate funding more efficiently without all the costs inherent in the business. If a bank is going to make money in retail banking, it has to be very focused on serving specific segments efficiently and profitably.Mary Beth Sullivan
Managing Partner, Capital Performance Group

Myth 37. Legacy IT systems, regulation and security are the enemies of customer centricity and innovation.
Reality: This myth serves more as an excuse than a reality. While more difficult with outdated systems, many banks have created market leading products, services and experiences working around these challenges.Duena Blomstrom, VP of Sales, Meniga

Myth 38. Signature cards are a required form for opening a new account
Reality: While it is required to know your customer for many reasons, a signature card is not a regulated part of that requirement.Brett King, Founder of MovenMyth 39. Banks need to decide carefully where to invest in mobile payments, as there will be “one wallet to rule them all.
Reality: Banks must look for ways to ensure their issued payment credentials can be securely used as widely as possible in a variety of contexts.Zilivinas Bareisis, Senior Analyst, Celent Myth 40. Despite A Host of New Players, Traditional Banks Will Prevail in the End
Reality: The past is no guarantee of the future. The recent purchase of Simple by BBVA should be a lesson that many of the new players in the business are making inroads into how consumers prefer to do banking. While Simple is relatively small by banking standards, players like USAA, T-Mobile, Google, Amazon, Paypal, Square, and Apple can all grab significant portions of our business that generate much needed revenue streams.Retail Banker at $50 billion financial institution

Myth 41. The traditional bank marketing and lead generation model will continue to work as it has for decades, even in a humanized digital economy.
Reality: Many credit unions and community banks have adopted a variety of digital tools with no unified digital marketing strategy leaving them grossly unprepared for the continued consumer shift to digital.James Robert Lay, CEO, CU Grow

Myth 42. Customers like being served by bankers in polo shirts.
Reality: Many people still prefer the feeling that the bank takes the role of 'money handler' as seriously as they do.Steve Cocheo
Executive Editor and Digital Content Mgr., ABA Banking Journal

Myth 43. Mobile banking should be a paired down version of online banking.
Reality: Mobile should be built from mobile experiences outward, potentially leveraging a downloadable app. The goal should not be to provide access to all customer account information, it is to become the Primary Financial Application the customer accesses.Bradley G. Leimer, Mechanics Bank

Provide Your Myths

In receiving these great ideas from across the globe, it was amazing to me that there were only two duplicates (around data and cross-selling). What that tells me is that we probably have several dozen or more myths in the marketplace that need busting.

If you have another myth (or a comment on the myths I have provided above), share it with others in the comment section below. In addition, feel free to share your ideas on Twitter using #RBMyths.

Thanks to everyone who helped build this impressive (and rather frightening) list.

Thanks. I am impressed with the continued contribution of my network of friends (including you) who share their insights so willingly (and quickly). The social media world is a great source of viewpoints and perspectives that go far beyond my experience. You have found this as well with your excellent report on what buyers buy.

Another old chestnut is "our team/branch/area/region/department/division/product line/business/bank/country is different to all the others and you must be in an expert in ours to understand what we do"

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